Foundry Daily News

11. August 2015

USA - Tesla's Next Big Product Isn't the Model X - It's This

As Tesla readies to start selling its SUV, the Model X, investors are looking forward to its next big release -- the Model 3.

Tesla's valuation is significantly higher than other auto makers, due in large part to the belief investors have that the company will make electric vehicles a mass market item, as opposed to just a luxury. Tesla has said that it hopes to deliver 500,000 vehicles annually by 2020, with much of that volume stemming from the Model 3.

In the past, CEO Elon Musk has said that he expects the Model 3 to be priced around $35,000-$40,000, a significant drop from the Model S. The Model S starts around $60,000 (including tax credits), while pricing for the Model X has not yet been revealed.

The Palo Alto, Calif.-based Tesla reported second-quarter results last week, losing an adjusted 48 cents a share on $1.2 billion in revenue. Wall Street was expecting an adjusted loss of 59 cents a share on $1.17 billion in revenue.

Tesla's mass model sedan, the Model 3, is slated to be released in 2017, and may be shown off in March 2016, putting the car on a firmer track than just talk from CEO Musk and team.

The Gigafactory, a sort of park of factories, being financed by Tesla and Panasonic, will help enable Tesla to get to the 500,000 annual volume production level.

On the company's conference call, Tesla said that it hopes the Model 3 will not affect the production of the Models S and X next year, but it might affect some in 2017.

Tesla is already laying the ground for the Model 3, noting it has laid the work in the company's paint shop for 10,000 cars a week. It's also made large investments in its foundry in terms of casting and has also made significant investments in stamping and metal sheet forming technology not associated with stamping.

With Tesla trading at an exceptionally high valuation, investors are hoping the company's mass-market Model 3 will change the automotive industry. So far, Tesla is getting the benefit of the doubt.